4. The VAT return Flashcards
What notice sets out records to be kept
VAT Notice 700/21 Record Keeping for VAT
Basic records related specifically to VAT are:
- Copies of sales invoices.
- Originals of purchase invoices.
- Credit (and debit) notes.
- Export documents.
- VAT Control account (which summarises all items of input and output tax and acts as the source of data for the VAT Return.
Additional business records involving vat that should be kept include:
- Bank statements (paying in slips and cheque stubs)
- Purchase orders and Delivery notes.
- Cash books and petty cash books.
- Purchases and Sales day books.
- Ledger Accounts.
- Payroll records.
- Computer printouts and reports.
- Annual Accounts.
Records for output tax (biz buys and sells on credit and manual sys)
- Sales Day Book (records credit sales; compiled from sales invs.)
- Sales Returns Day Book (records credits: ret’ns, correct’n, PP disc)
- Cash Book - receipts side (records details of receipts not on credit. Receipts for credit sales should be ignored since already dealt in DBs)
Records for INPUT tax (biz buys and sells on credit and manual sys)
- Purchases Day Book (Records all purchases made on credit)
- Purchases Returns Day Book (Records any credits received)
- Cash Book - Payments side (Records any cash purchases, credit purchases should be ignored as dealt in Purchases Day Book)
- Petty Cash Book (Records small expenses)
Bad debt relief rules?
Which Box?
> 6 months and < 4 years 6 months
Must also have been written off in accounts and transferred to separate Bad Debt account.
Add amount to Box 4
VAT Account reconciliation with VAT Return.
Important internal check for any Vat-registered business.
Calc in VAT control account of amount due should always equal VAT return.
If not needs investigation. Errors include:
Misposting to the Vat account or errors and omissions on the Vat return.
Error correction reporting threshold.
The greater of:
£10,000
1% of the quarterly turnover figure in Box 6 on the Vat Return for the period when the error was discovered, up to max of £50,000
If the NET value of all errors is within threshold then adjust Box 1 or 4 of the current Vat Return.
If the net error is over the threshold need to make a “voluntary disclosure”
Box 1
Total Vat due on Sales and other outputs.
Include fuel scale charges.
Include VAT on Zero-rated SERVICES from other EU member states.
Adjust for Credit notes (and errors below threshold if applicable)
Box 2
VAT due on acquisitions from other EU member states
Box 3
Total of Boxes 1 and 2.
Calculated automatically
Box 4
Total VAT reclaimed on Purchases and other Inputs.
Include tax on EU SERVICES / ACQUISITIONS (Reclaiming from 1 and 2)
Include credit notes (and correction of errors below threshold)
Box 5
Box 3 minus Box 4
Automatically calculated
Box 6
Total of Sales and other outputs excluding any VAT.
Will include:
- Exempt, Standard and Zero-Rated supplies.
- EU supplies
- Non-EU supplies
Adjust for credit notes
Box 7
Total of Purchases (Inputs) excluding any VAT.
This includes:
- Exempt, Standard and Zero-rated purchases.
- Acquisitions from EU member states.
- Acquisitions from Non-EU
Adjust for credit notes.
